Just days ago, we highlighted when fund manager David Einhorn pointed out a small New Jersey deli that was trading with an insane market cap of over $100 million as one of the hallmarks of the bubble the market is in. Einhorn wrote:
"Strange things happen to all kinds of stocks. Last year, on one day in June, the stocks of about a dozen bankrupt companies roughly doubled on enormous volume. Recently, the Wall Street Journal reported a boom in penny stocks.
Someone pointed us to Hometown International (HWIN), which owns a single deli in rural New Jersey. The deli had $21,772 in sales in 2019 and only $13,976 in 2020, as it was closed due to COVID from March to September. HWIN reached a market cap of $113 million on February 8. The largest shareholder is also the CEO/CFO/Treasurer and a Director, who also happens to be the wrestling coach of the high school next door to the deli. The pastrami must be amazing. Small investors who get sucked into these situations are likely to be harmed eventually, yet the regulators – who are supposed to be protecting investors – appear to be neither present nor curious."
After Einhorn's comments went viral, people began digging into the "unusual" story of Hometown Deli and voila, we were granted even more strings to pull on. For example, CNBC reported yesterday that the deli is liked to another company whose stock has skyrocketed over the last year, E-Waste.
E-Waste is a self-admitted shell company and had total assets of about $183,000 and liabilities of $412,400 as of its most recent SEC filings. It posted a net loss of $58,000 for the 9 months ended November 30. The company's own filings state it was created in 2012 “to develop an e-waste recycling business” but “was not successful in its efforts and discontinued that line of business."
It has been a shell company since then and has been looking to “engage in a business combination with a private entity whose business presents an opportunity for its shareholders.”
But E-Waste's stock, like Hometown's, has recently rocketed to a high of $10.25 per share. It put the company's market cap at over $100 million.
Not unlike Hometown Deli, E-Waste also has little ongoing business. Yet this didn't stop Hometown Deli from lending E-Waste $150,000 late last year - even while the deli was closed due to the pandemic. E-Waste CEO John Rollo also had an interesting former gig for someone in the waste business: he worked another job as a patient transporter at a northern New Jersey hospital, at a healthcare system CNBC says he's still employed at. Hometown International's CEO is a New Jersey high school principal and a wrestling coach.
Rollo had also won two Grammy awards, the report notes, as "a recording engineer and producer on albums by artists such as The Kinks, Joe Cocker, Whitney Houston, Kool & the Gang and Quiet Riot".
And there's yet another interesting connection between the two companies: they each have the same Hong Kong entity as their largest shareholder and "similar consulting contracts" with companies controlled by investors. Additionally, both companies employ the same New York law firm.
Like Hometown, E-Waste also was involved with a lawyer who was sued by the SEC for alleged involvement in fraudulent schemes. Hometown's lawyer was also charged with federal crimes, while E-Waste's lawyer was not.
Involved in both companies is a man named Peter Coker, Sr., whose son Peter Coker Jr. is Chairman of Hometown International. He is also "executive chairman of South Shore Holdings Ltd., a Hong Kong company that owns a financially troubled hotel in Macau, China," CNBC notes. The report details what appears to be numerous related party transactions between the Cokers, entities they control, Hometown and E-Waste.
Meanwhile, as the Fed sees no signs of excess, we pointed out this morning...
A New Jersey deli has a bigger market cap than Credit Suisse— zerohedge (@zerohedge) April 22, 2021